Government ducks passenger fare hike in railway budget

By Manoj Kumar and Matthias Williams

NEW DELHI (Reuters) - The government announced a fuel surcharge of just under 5 percent on freight traffic in the railway budget on Tuesday, but ducked the opportunity of a further round of passenger fare hikes as it gears up for a national election due next year.

India's railway network is the world's fourth largest but it has suffered from years of low investment and political meddling. The result is a creaking system plagued by delays, overcrowding and slow freight delivery times that sap the competitiveness of Asia's third-largest economy.

Budget 2013 special page on Reuters India online http://in.reuters.com/subjects/india-budget-2013

Reuters slideshow on Indian railways http://in.reuters.com/news/pictures/slideshow?articleId=INRTR3E9YF#a=1

The railways budget is closely watched, both by the millions of poor Indians who use it every day and see cheap rail travel as a right, and by economists looking to see how far the government will be willing to go to tackle politically sensitive reforms.

The railway budget was delivered two days before Finance Minister P. Chidambaram unveils what is expected to be the most austere federal budget in years. Analysts say India's railways need a radical overhaul to get the system back on track, requiring difficult decisions that previous railway ministers have also avoided.

(Reporting by Manoj Kumar and Matthias Williams, editing by Ross Colvin and Sanjeev Miglani)